The CEO’s Guide to Hiring Consultants

Hiring a consultant can be a turning point in a company’s history—a chance to reset strategy, beef up a critical function, forge a path into new markets or find a merger partner. Or it can be a costly and frustrating experience. Getting a good return on your consulting investment has a lot to do with how you and your team hire and help manage the engagement.

Hiring: Plan ahead
Some CEOs don’t think about hiring a consultant until it’s clear that they have challenges that their teams are unable to overcome—by which point, the company may be in serious trouble. Other CEOs—typically leaders of large, complex corporations—use consultants routinely, in good times and bad, to tackle thorny issues or refine a given process.

Still, other companies use consultants more tactically—to identify a merger partner or help navigate new regulations. For mid-size and smaller companies that can’t justify the expense of consultants every year, but want to avoid having to find consultants at a moment of panic, it pays to establish relationships with consultants that specialize in your industry or have expertise in challenges that surface regularly—HR or logistics, for example. In fact, interviewing a consultant when you don’t need one can help you articulate the issues you face. You also learn how different consultants work and what you might expect from an engagement.

Boutique consulting firms are often staffed by industry veterans with deep knowledge of industries such as manufacturing and retail. Others specialize in sales or HR or IT. By talking to them, you can learn things about your industry and running your company that you might not discover any other way. Also, these firms tend to be less expensive than the big management consulting firms.

When it’s time to bring in a consulting company, do your due diligence. Approach it like filling a top position on your team. Check around your industry and get references that prove the firm has done good work in the area where you need help. Focus on identifying the actual consultant known for this work, rather than the firm. Talk to peers about who’s good and who’s not. The consultant who made the dazzling presentation at a conference may not really have what it takes to help your company. Also, when you do hire a consulting firm, avoid the “bait and switch”—make sure the contract spells out who will do the work and how much of the partner’s time will be devoted to your project.

Fee structure is another consideration. More and more firms are accepting a portion of their compensation in incentive pay: if their program delivers a specified amount of savings, for example, they will get additional payments. On the plus side, clients pay for proven results. Putting fees at risk, however, can incent consultants to design and implement programs that meet defined short-term goals rather than sustainable performance. If you choose an ROI-guaranteed contract, review the terms carefully.

Managing the engagement
To make the most of a consulting engagement, a CEO should be visibly involved. While CEOs of large global corporations may not be able to directly oversee every project, middle-market company leaders should plan to be involved in every step of the process by:

Scoping the project and the timeline. Invest upfront in specifying the problem the consultant is expected to solve, what work will be done and in what phases and how long it will take.

Getting buy-in from top team members and across the organization. Demonstrating your personal support for the project and involving the top team early can help ensure that your whole organization supports the consulting effort. It’s also key to take any signs of resistance from team members seriously and look for ways to overcome those concerns before the engagement begins.

Avoiding surprises. Before any meeting where sensitive ideas might be discussed, avoid potential friction by getting the consultants to brief participants ahead of time. Assemblng the team carefully. Typically, the consulting company will send a team to work with a group of in-house executives and managers on site. The client company’s team members should be selected with care and, to the extent possible, team members should be dedicated to the engagement work and encouraged to believe that helping the consultants will be career enhancing.

Pushing for “capability building.” CEOs should push consultants to teach managers and employees the skills they will need to keep the new process or strategy going. After the consultants have gone, there is still work to be done. CEOs can help ensure that the company gets the most out of its investment by being visible champions of change.

In addition to communicating to the troops the importance of the change, CEOs and other top leaders should demonstrate—through budgeting, promotions and other actions—that the new way of operating is for real. —By Carl P. Hensley

ONE COMPANY’S JOURNEY
Soon after taking the reins at ABM Industries in January 2015, Scott Salmirs began planning its transformation. Founded in the early 1900s, ABM had grown from a humble San Francisco window-washing company into a $5 billion global behemoth providing janitorial, parking, HVAC, maintenance and related services in 20 countries. However, its far-flung operations were in need of streamlining to become responsive to client needs and more advantageous for investors.

As Salmirs told analysts in September of 2015: “We know that to compete effectively and continue creating value for our shareholders, the ABM of the future must be fundamentally different from the ABM that exists today.” Like many chiefs at the precipice of a corporate reorganization, Salmirs was aware of the enormity of the task—and that the requirements of transformation exceeded internal resources.

The Search & Selection
“We like to believe we are experts when it comes to providing facilities services,” Salmirs says. “That does not necessarily mean we are expert in strategy.” To bridge the gap, he solicited consulting firm referrals from CEOs in his network and chose four to open a dialogue with.

Josh Feinberg, managing director at the Boston Consulting Group (BCG), got one of those calls. “Scott talked about how he believed that the core business was very strong and that now was the time to leverage that strength,” Feinberg recounts. “He wanted a strategy that would unlock the company’s full potential…and he talked about how important it was to galvanize” ABM’s 118,000 employees. Feinberg says Salmirs’ focus on gaining internal buy-in reflected BCG’s philosophy: Identify and empower employees at various levels—not just the upper echelons—to lead the change.

During a series of calls, Salmirs narrowed the field to two contenders and conducted face-to-face meetings where the finalists introduced the employees who would handle the work on site. Consultant flexibility—a willingness to stray from pre-determined solutions and consider situational alternatives—was a must, says Salmir, who ultimately saw BCG as least likely to provide “we-always-do-it-this-way” responses. BCG “seemed flexible rather than prescriptive.”

Next came a series of conversations in which Salmirs’ team met the number crunchers and analysts with whom they would share a workspace and mission. As he probed BCG to see how they would approach and manage the engagement, and who from BCG would be doing the heavy lifting on site, Feinberg and David Webb, a BCG managing director, evaluated him as well, focusing on the depth of his commitment to overhaul ABM. “Client commitment” is a concern that arises frequently among consultants. The phrase encompasses the collected resources—dedicated employees, funding, physical facilities—the CEO is prepared to dedicate to the overall project.

Salmirs brought the team of direct reports who would serve as the executive committee to the final meetings with BCG. Feinberg and Webb met the squad and listened closely to their questions and  suggestions. Among the ranks were the future project champions, or owners, as consultants describe client-side employees who assume leadership positions in the coming transformation.

Salmirs, for his part, scrutinized the staffing issue from the supplier side. “I wanted to meet the key people who would be on the team,” he says, “not just the high-level partners you see at monthly stewardship meetings.”

In April, BCG was chosen to handle Phase One of the assignment and stay on to handle the subsequent phases. “What put BCG over the top was alchemy,” says Salmirs, who felt BCG had established a strong rapport with his team, a bond that he believed augured a solid working relationship once the actual project began.

The Outcome
Planned as a four-step process, ABM’s transformation began in June 2015. The first step was creating a roadmap—a long-term strategic plan. The roadmap was completed by September and quickly approved by the board. ABM then signed a follow-up contract with BCG to begin Phase Two. Working in tandem, ABM and BCG identified ABM’s key verticals—areas where it could most readily build a competitive advantage—as commercial buildings, aviation, healthcare, education and high tech. Next, they restructured the company around those, replacing a geographic orientation in place for over a century. Thus, employees who cleaned hospitals in Philadelphia were now in the healthcare division, rather than the Philadelphia branch office. The third phase, launched last May and scheduled to conclude in October 2017, involved standardizing account-management processes and detailed work rules across the new verticals, creating what the company calls process tools and providing additional training based on the employees’ new responsibilities.

Initial results of the new organizational structure were evident when ABM reported Q3 operating profits of $18.5 million for fiscal 2016, compared with an operating loss of $7.6 million in the same quarter a year earlier. Salmirs attributed the improvement to several factors, one of them the new operating structure, and noted that the company originally looked for the reorganization to produce 1 percent margin growth.

For a company that had been operating on a razor thin margin of 1.2 percent, meeting that goal represents an impressive 83 percent margin jump. To date, the transformation initiative has already gotten ABM halway there and the company is reportedly on pace to hit its goal by the end of 2017.

The Takeaways
In BCG, Salmirs selected a large company, but the $300 billion global consulting market is made up of hundreds of firms of all sizes and with varying specialties. Whether CEOs are contemplating a global powerhouse or a boutique shop, Salmirs’s diligent approach, with its emphasis on compatibility and responsiveness, is a good one, industry veterans agree.

“It boils down to looking at three things—competence, credibility and chemistry,” says Ted Bililies, managing director at AlixPartners, who urges CEOs to vet the capabilities of prospective firms with their peers. “I can’t emphasize reference-checking enough.” As with ABM, chemistry is often the deciding factor, he adds. “Chemistry isn’t just, ‘Do I like you?’ It is, ‘Do you get me? Have you taken the time to understand our company—our culture, our shared beliefs, values and behaviors?’ Without that, consultants can do unintentional harm, coming in like the proverbial bull in the china shop.”

Industry knowledge—as opposed to process mastery—can also be a differentiator. Some strategic consultantsargue that their broad experience across industries and practices enables best-of-breed thinking rather than we’ve always-done-it-this-way stasis. Others readily claim industry cred. Heather Ziegler, manager of Deloitte’s Stamford, Connecticut practice, notes that consultants “should be able to share anonymized engagement details with you,” to help you imagine what teaming with them might look like and what you could achieve together.

When shopping for advice, McKinsey’s managing partner for North America, Gary Pinkus, recommends setting one’s sights high. “Make sure the size of the prize is worth the journey,” he says. “The cost involved—not just the value of our time, but the internal costs you’ll have when you put first-rate talent on the project team—can be a reasonably expensive event.”

It’s also key to recognize that the journey doesn’t end when the consultants leave. “The CEO needs to name champions of sustainability who will be measured at the 6-month, 9-month and 12-month mark based on continuing the initiative,” says Bililies. “He needs to say, ‘John, Mary and Scott, you need to let me, the CEO, know if the organization is flipping back to its old ways.’ Ultimately, it’s all about effecting and sustaining change.”—Warren Strugatch